Check Point Software checks out with analysts

RobertDaniel

NEW YORK (MarketWatch) — Tech-security-savvy Israel’s recently been targeted by hackers, including one who claims he’s from Saudi Arabia and has exposed credit-card data as well as others who went after the websites of the Tel Aviv Stock Exchange and El Al Israel Airlines with so-called denial-of-service attacks.

Online-piracy debate reaches China

(3:28)

Entering the fray over online piracy and what Washington should do about it, China expresses opposition to the U.S. listing Alibaba's e-commerce site Taobao as a piracy offender.

Reports this week also said that Israeli hackers retaliated by attempting to disable the sites of the Saudi Arabia and Abu Dhabi securities exchanges.

An Israeli company that makes its living by preventing such nefarious activities is Check Point Software Technologies Ltd. The company
CHKP, +0.74%
produces firewalls, digital bodyguards for networks at companies, telecom- and Internet-service providers and more.

One prominent consumer name in its portfolio: ZoneAlarm antivirus and firewall products for PCs. And for enterprises, Check Point creates what it calls blade architecture, with each software blade independently protecting particular services or applications and also serving as a building block for larger integrated solutions.

Estimates exceeded

On Tuesday, Check Point beat analysts’ earnings forecasts, posting fourth-quarter profit of 84 cents a share on an adjusted basis. This compared to the FactSet Research-compiled consensus estimate of 82 cents a share and the year-earlier quarter’s profit of 73 cents. Revenue climbed 12% to $356.8 million, 1% above the FactSet-derived consensus.

Check Point Software

Check Point Software's architecture is based on what it calls blades, each of which is assigned to protect particular services or applications but also is a building block for larger integrated solutions.

Check Point
CHKP, +0.74%
executives estimated that first-quarter profit would come in at 69 cents to 73 cents a share on revenue ranging from $305 million to $315 million.

FactSet’s consensus estimates as of mid-afternoon U.S. Eastern Time Tuesday were 72 cents a share of profit and $313.7 million, respectively. On Thursday, the consensus estimate was unchanged, but the revenue view ticked down to $312.8 million.

“As cyber-attacks and security risks reach new levels of sophistication, customer expectations for their security infrastructure also increase,” said Gil Shwed, Check Point’s founder, chairman and chief executive, in the earnings release.

It’s been a bumpy year for Check Point’s shares, however.

The 52-week low is above $44, touched just about a year ago, while the high above $61 was posted late in October. From that peak through the day before the earnings report, the stock dived 17%.

The stock recouped nearly 8% on Tuesday to just under $55.

Views from the analyst community

A number of analysts were positive on the results.

Robert Breza of RBC Capital Markets saw “a strong quarter against low expectations.” He liked the company’s “strength at the high end” as it secured 49 contracts at values of at least $1 million, and he affirmed an outperform rating and $65 price target.

Control of operating expenses helped Check Point on the bottom line, Citigroup analyst Walter Pritchard wrote. He affirmed the stock as a buy with a $68 target, although he said that the 8% pop on Tuesday came as a surprise and that he didn’t “expect further outperformance in the short term.”

At Morgan Keegan, analyst Jonathan Ruykhaver affirmed an outperform rating and $68 target, saying Check Point should “benefit disproportionately from an increasing cybersecurity-threat environment” coupled with its efforts to refresh older products and broaden its overall offerings.

And echoing a number of his peers, analyst Shaul Eyal at Oppenheimer said the company’s own full-year financial estimates — $3.10 to $3.20 a share for profit and $1.35 billion to $1.4 billion for revenue —might be conservative, in light of Check Point’s “ability to aim low and shoot high, setting up fiscal 2012 for possible outperformance.”

FactSet’s current 2012 estimates: $3.18 and $1.38 billion.

Pouring a bit of water on the enthusiasm was Bank of America Merrill Lynch. Analyst Tal Liani affirmed the stock at neutral, saying he expects revenue growth to ease and spending on research and development to restrain profit margins. His target price: $60.

Update on a previous column

Frutarom Industries Ltd.
FRUTF, +1.46%
(FRUT) (FRUT) is buying another company. This is a recording.

In all seriousness, the Haifa, Israel, flavors-and-fragrances company, which MarketWatch looked at on Dec. 1, on Tuesday announced its second deal in the first month of 2012, after buying five firms in 2011.

This time, Frutarom expanded its presence in Central and Eastern Europe, snapping up 56% of Etol of Slovenia for just under $25 million and planning a tender offer for the rest of the shares, which are traded on Slovenia’s stock exchange.

Etol, founded 1924, makes natural flavors for food and drinks. In particular, Frutarom said, Etol specializes in flavors derived from fruits local to the region. For the year through Sept. 30, 2011, Etol’s revenue rose 7.5% from a year earlier to $68 million.

Noting the deal, the Israeli investment house Psagot affirmed a buy rating on Frutarom and lifted its target price on the stock to 42.4 shekels ($11.20) from 41.6 shekels. The stock closed Thursday on the Tel Aviv Stock Exchange up 0.5% at 34.54 shekels, putting its advance for 2012 to date at 1.9%.

Also on the Tel Aviv Stock Exchange Thursday, the TA-25 Index finished up 0.5% at 1,136.64. The result put the benchmark up 0.7% for the week and 4.7% for the year.

The TA-100 Index on Thursday closed 0.4% higher at 1,032.13. That also put the broader index up 0.7% for the week, while for the year to date it’s 5.5% higher.

The Bank of Israel set the representative rate for the shekel against the U.S. dollar at 3.784 on Thursday. So the Israeli currency is 1.4% higher in the past week. The shekel is about 1% stronger in 2012, having finished 2011 at 3.821 to the greenback.

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